The WARN Acts: Large Employer Obligations Related to COVID-19

04 / 08 / 2020

By Karuna S. Brunk

Separate from the requirements of the FFCRA, COVID-19 has created an economic and financial crisis for employers. The DOL has indicated that employers may layoff and furlough employees related to economic conditions without violating the FFCRA. Larger employers may be required to provide notice to employees in the event that they want to conduct a mass layoff or need to close a business site. Generally, the purpose of the notice requirement is to give employees time to adjust to the prospect of lost employment.

1. Federal WARN Act

The federal Worker Adjustment and Retraining Notification Act (“WARN”) applies to employers that have either (a) 100 or more full-time employees or (b) 100 or more employees, including part-time employees who, in aggregate, work at least 4,000 hours per week.

WARN requires employers to give a 60-day advanced notice to employees of plant closings and mass layoffs. Plant closing means the permanent or temporary shutdown of a single site of employment or of one or more facilities or operating units within a single site of employment if the shutdown results in 50 or more employees losing their employment in at least a 30-day period.

WARN is also triggered if an employer lays off 500 or more workers at a single site of employment during a 30-day period or lays off 50-499 workers and these layoffs constitute 33% of the employer’s total active workforce (not counting part-time employees). “Employment loss” does not include a termination for cause (poor performance or bad conduct, for example) and must exceed 6 consecutive months. Alternatively, WARN may be implicated in the case of a reduction in hours of more than 50% during each month of any 6-month period.

If employees are not notified in accordance with WARN, employers may have to pay backpay, benefits, and civil penalties for each affected employee for each day of the defective notice.

2. Illinois WARN Act

The Illinois WARN Act applies to employers with (1) 75 or more full-time employees, excluding part-time employees, or (2) 75 or more employees, including part-time employees who, in aggregate, work at least 4,000 hours per week.

Similar to the federal WARN Act, the Illinois WARN Act requires the employer to provide 60-day advanced notice of pending business site closings or mass layoffs. A plant closing is a permanent or temporary shutdown of a single site of employment if the shutdown results in an employment loss at the single site of employment during any 30-day period of 50 or more employees, excluding part-time employees. The Illinois act defines a “mass layoff” as a reduction in force that results in employment losses for at least a 6-month period of at least 25 or more full-time employees and 33% or more of the workforce or 250 or more full-time employees.

Given these federal and state requirements, large employers have the following options to deal with the economic downturn due to the COVID-19 crisis:

Give Notice: Proactively give a WARN notice to employees that the company may have to implement a plant closure or a mass layoff due to the economic downturn and altered business conditions. This will meet the employer’s federal and state WARN requirements and protect the company from potential liability. Employers should consult with a qualified labor and employment attorney to prepare and send this notice.

Rely on Internal Policies: For example, encourage employees to take voluntary vacations, offer reductions in pay, cut hours for non-exempt employees, voluntarily furlough workers to take care of family members, and practice social distancing. Work with an attorney to implement such policies and communicate effectively with employees. Any internal policy decisions to avoid a mass layoff or plant closure should be cross-referenced with employer requirements under the FFCRA.

Government-Mandated Closures: Layoffs as a result of government action would not trigger WARN because they would not be considered initiated by the employer.

Recall Employees: If an employer intends to recall employees before the 6-month employment loss period elapses or subsequent to the COVID-19 crisis, the employer could avoid the requirements of WARN. However, tread carefully with this option – this period of economic uncertainty may extend far beyond what you anticipated.

Applicable Exceptions: The Federal WARN Act does not require the 60-day notice for employment losses that are a result of a “natural disaster.” Illinois also provides an exemption to the notice requirements in the case of a “physical calamity.” In these instances, employers should provide as much notice of a layoff as practical in advance of the natural disaster or after the fact. Although COVID-19 will likely qualify under this exception, an employer may open itself to litigation if an employee argues that the layoff was not a direct result of the pandemic but a result of an economic downturn.

The Federal WARN Act allows employers to provide fewer than 60 days’ notice for unforeseeable business circumstances, but, again, the company would be required to give as much notice as possible. This may also open the company to litigation. However, given the dramatic downturn in the economy, a court may debate such an argument. The Illinois WARN Act allows the company to provide a shorter notice if the company can show that it was actively seeking business loans or money that would have allowed it to postpone the layoff.

Di Monte & Lizak attorneys are available to assist you as you make employment decisions and traverse this difficult economic environment.